>> tom: raj rajaratnam has his day in court, as the galleon group insider trading case gets underway in new york. >> susie: so, were the tips illegal, or just good research? it's a question at the heart of wall street's $2 trillion hedge fund industry. you're watching "nightly business report" for tuesday, march 8. this is "nightly business report" with susie gharib and tom hudson. "nightly business report" is made possible by:

this program is made possible by contributions to your pbs station from viewers like you. thank you. captioning sponsored by wpbt >> susie: good evening, everyone. jury selection began today in the biggest insider trading case in a decade. on trial is raj rajaratnam, the billionaire investor and cofounder of the galleon hedge fund. tom, he's accused of making $45 million through illegal stock tips. >> tom: susie, prosecutors allege rajaratnam and 25 others swapped confidential corporate secrets on many well known companies, including google, ibm, ebay, intel, and goldman sachs. >> susie: our cameras were rolling when rajaratnam pulled up to the courthouse early this morning. from the moment he arrived, raj rajaratnam was in the spotlight. >> are you going to testify in your defense? >> susie: federal prosecutors

allege rajaratnam used inside information to trade 35 stocks. the feds plan to use 173 wiretapped conversations and testimony from confidential informants against rajaratnam. on the list of the government's potential witnesses is lloyd blankfein, the c.e.o. of goldman sachs. rajaratnam's net worth is estimated at $1.5 billion, and he has spent an estimated $20 million on his defense, so far. his lawyers are expected to argue rajaratnam was simply doing thorough research in his role as a hedge fund manager. the trial is likely to last six to eight weeks. it is the government's highest profile attempt to crackdown on illegal trading on wall street. here's how u.s. attorney preet bharara put it when charges were announced at the end of 2009. >> it would be a mistake to think that this investigation is focused only, or even principally on, hedge funds.

we have gone far beyond that. in fact, this investigation goes to the very heart of fair play in the business world. >> susie: joining us now with more analysis, steven feldman. he's a former u.s. attorney who worked in new york's securities fraud task force, and is now a white collar defense attorney at herrick, feinstein. >> hi, steven, nice to have you here with us. >> thank you, susan. >> susie: how strong is the government's case against raj rajaratnam? >> susie, that's what we're going to find out. the government, up until now, does all of the talking. they have the indictment. in that indictment, they put forward their best foot, and all their evidence. that evidence seems to be strong. it includes hours and hours of wiretap evidence, that includes the testimony of confidential performants. the defense has not had a chance to do anything yet. that's why we have a trial. >> susie: rach' raj

rajaratnam's lawyers saying he was doing research. what exactly is insider trading? >> well, there is different kinds of of it. the very simplest is insider trading is when someone who has a duty to accompany shareholders trades material, non-public information, in breach of that duty. >> susie: all right. so who is the victim here then? >> well, the theory is that the entire market is the victim. all of us -- all of the investors in our market -- if we think the markets are rigged, some people are getting details that the rest of us don't have access to. we're not going to have faith and we're not going to invest our money. so in theory, we're all victims. >> susie: now, there has been a lot of speculation of whether or not raj will be testifying on his own behalf. if he does, does that work for or against him?

do juries like to hear from the defendant? >> jury like to hear from the defendant. even though the burden is always on the government. the defendant can sit back and say nothing at all. the juries have trouble taking that concept. they want to hear what the defendant has to say. it is an important consideration for the defendant to decide if he is going to testify. >> susie: they say tomorrow is the opening arguments for the case. they say many jurors make up their minds depending on what is said in those opening arguments. what does raj rajaratnam's attorney have to say in the opening arguments? >> tomorrow is an opening statement. the arguing part is supposed to be left for the end. the statement is an introduction of what is going to happen in this case, what the government thinks the evidence will prove, and how the evidence will fit together in context. what the defense attorney has to stay -- he doesn't have to say thing, they can skip an opening -- but

the defense attorney will want to point out what he thinks will come out in the trial. and he wants to show that even though there are lots of wiretaps, those conversations are a ambiguous, and those people have reason to lie and make up things. >> susie: why is this trial so important? why is there so much attention on it? >> this is a huge hedge fund trial. we haven't seen these kind of cases where the government has used wiretap and gone after such a big target. so to the government, on its mission to try to create deterrents and stop people from committing insider trading, this is huge for them. this is their poster child. >> susie: we'll see how it all plays out. thank you so much for in insights this evening. thank you so much. we've been speaking to steven feldman, an attorney at feldman feinstein. >> tom: here are the stories in

tonight's "n.b.r. newswheel." bank of america sparked confidence on wall street-- the dow rose 124 points, the nasdaq added 20, and the s&p 500 was up 11. trading volume fell back below a billion shares on the nyse, and came in under two billion shares on the nasdaq. bank of america says no to new acquisitions. instead, the bank wants to focus on returning value to shareholders. at its first investor day conference since the financial crisis, c.e.o. brian moynihan said he'll do that through cost cuts, dividends and share buybacks. no word yet on an emergency meeting by opec. oil ministers are holding informal talks, but they haven't decided yet to call an emergency meeting addressing rising oil prices and escalating violence in member country libya. still ahead-- with more americans cooking at home, housewares are hot. we get the latest from the annual home and housewares show in chicago. >> susie: as we just reported, stocks surged higher today. it may be hard to believe the dow is now sitting comfortably

above 12,000. there is some debate on wall street about whether the bull run will continue, but most market pros agree there's still value in the stock market. suzanne pratt got three opinions as to where to find it. >> reporter: stocks are one of the few things people keep buying when their prices move higher. even a doubling of the major stock market indexes in the past two years hasn't turned investors off of equities. but some market pros are now urging caution and predict returns this year will be more modest. and they say it will be harder to make money in stocks, unless investors know where to look. strategist andrew burkly calls it a sector picker's market. he likes energy, healthcare and financial stocks. >> i think if you look at the valuations of financials, they haven't run up nearly as much as the rest of the market, because there's still this cloud of uncertainty in terms of regulatory reform, how fast

consumers will come back and borrow money from banks, how fast transactions will pick up. >> reporter: others like david lefkowitz of ubs recommend growth stocks as corporate profit growth slows. >> as growth becomes more scarce in the economy, investors rotate into growth companies, and the premium that growth companies get in the market, the valuation premium, tends to increase a bit. >> reporter: still others say this is an environment where size matters. small-cap stocks, as measured by the russell 2000, have surged 140% since march 2009. market pro phil dow says the big rally in small names is over. he think it's time to think larger, as in large caps. >> longer term, if we're in a general global economic recovery with years of better earnings ahead, my guess is large cap is the place to be right now. >> reporter: so what could spell trouble for these still attractive areas of the stock market?

you guessed it-- higher oil prices. if crude oil spikes up another $20 or $40 a barrel, experts say investors will shun all segments of the stock market. suzanne pratt, "nightly business report," new york.

>> tom: after a small dip this morning, the major stock indices roared ahead as oil prices dropped a fraction from their recent high. bank of america was a big part of the jump for the dow jones industrial average, and for making the financial sector the best sector today. shares rallied almost 5% on huge volume. the bank held its first investor day today since 2007. c.e.o. brian moynihan calls it a new era for the bank. in addition to pledging no more mergers and a return to dividends, b-of-a will split its $2 trillion portfolio of home loans just about in half. it will continue to own 49%, while separating the rest for sale. those will be the worst- performing, riskiest loans, most of them done between 2004 and 2008, during the worst of the housing bubble. speaking of mortgages, homebuilder pulte group saw a nice 8% pop, reversing some of

the slide shares have seen since may of last year. the builder said it signed 11% more home sale contracts in the first two months of this year compared to last year. other builders also saw some stock buying. mdc gained 11%. it got a couple of analyst upgrades. ryland was up 7.5%. kb home rallied about 5.5%. while bank of america led the dow, mcdonald's was the laggard, falling 1%. february same-store sales were up more than expected, but the performance in the u.s. was disappointing. the stock has seen some choppy times in the past two months after hitting new all-time highs in december. along with financials, the telecom sector was ringing up gains, led by sprint nextel. shares jumped almost 5%. volume more than tripled. the rally takes sprint to its highest price since october. it's talking with deutsche telekom about its t-mobile business in the u.s. netflix continues to come off its record high, falling another

6% today. this is the past 90 sessions. the drop today brings the stock down 21% of this high, and its first close below $200 since late january. netflix shareholders may be concerned about a deal time warned announced today, offering some movies through facebook, bringing the social network in as a competition against netflix. other's see it as competing against amazon and apple's separate streaming platforms. time warner and amazon stock fell 1%. apple was a fraction higher. and that's tonight's "market focus."

>> tom: the two-year market rally may have some investors searching for value. but even after the run-up in stock prices, the search for growth may lead you to smaller companies. tonight's "word on the street:" "growth." bryan ashenberg is a portfolio manager at thestreet.com. >> tom: nice to see you, brian. welcome back. how do you define a growth stock after this two-year bull rally we've seen? >> a growth stock is where it's revenues and earnings are growing faster than the market. >> tom: and you're finding some of the growth with smaller names, beginning with the-maker of semiconductors. this is omni vision technology. a little bit of volatile-elect because of apple. at $33 and change, what fuels omni vision up from here? >> omni vision has seen an

explosion in growth for mobile devices that have cameras in them. it is not just the iphones. it is the media that is driving growth. people want to share high quality images with their friends and family any time and anywhere. this is driving growth for omni vision's high-end image centers, and it is driving higher selling prices and generating higher profits. >> tom: and crocks, the best foam footwear, but fuels it up above $20 a share? >> i think investors don't realize that the company has over 250 styles of shoes. last quarter, 18% of revenues were driven by the company os core styles. over 31% of revenues were driven by new products. i think it shows that the new products are realing resonating with costumers. they are growing through company-owned stores, internationally and domestically, and it is increasing its wholesale

distribution, and it is growing its sales by direct sales through it's website. >> tom: what about the technology consult presessions. this has been stuck in a range. what gets it up in the teens again? >> i think what we're going to see is pretty straightforward. we're going to look for a continued improvement in the macro economics environment. it should allow a relief for what is a lot of pent-up demand for high-tech spending. they have lots of operating leverage. in fact, management has said their bookings have been increasing. over the past three months, 25% of their bookings have come from new costumers, which is indicative of the purse strings being loose center. >> tom: brian, any disclosures? >> i don't own any of them. >> tom: word on the street with brian ashenberg of >> susie: here's what we're watching for tomorrow:

quarterly results from retailers american eagle outfitters, children's place, and hot topic. also, the weekly updates on mortgage applications and inventories for crude oil and gasoline. hilary kramer is our "street critique" guest. send your questions for her to streetcritique@nbr.com. "take your money back." in essence, that's what billionaire investor carl icahn is telling all outside investors in his hedge fund. icahn says he no longer wants to be responsible to investors if there's another market downturn. in total, outside money makes up 25% of the funds' assets, or $1.7 billion. icahn says he's not predicting a crisis, but he has ongoing concerns about the economic outlook. >> tom: the number of homeowners who owed more on their mortgages than their homes were worth climbed at the end of last year. nearly one in four mortgaged homes were underwater in the fourth quarter, according to housing data firm core logic.

that's about 11 million residential properties. the sand states-- nevada, arizona, and florida-- had the highest percentage of underwater owners. the report predicts more grim news-- home prices will fall another 5% to 10% this year. >> susie: when it comes to your investments, tonight's commentator believes it pays to read the fine print.

here's john waggoner, mutual fund columnist at "u.s.a. today". >> you may think that fund literature has all the thrills of an elephant tranquilizer. and you're right-- every bit of interesting prose is surgically removed by lawyers. even so, you should grab a cup of strong coffee and read your fund's prospectus and statement of additional information. the prospectus tells you basic information-- what the fund invests in, how much it takes to open an account, who the manager is, and how long he or she has been running the fund. it's all good stuff to know. but the prospectus has two other very important bits of information. the first is the fee table. fidelity contrafund, for example, charges .92% a year to run the fund, which is well below average. but fees add up-- fidelity's fee table tells you that if you invest $10,000, you'll pay $1,130 over ten years, assuming a 5% annual return. the other is its explanation of how much, if any, you're paying in sales charges, and how you can reduce those fees. the statement of additional information, or s.a.i., will

tell you two more interesting pieces of information. the first is how much money your manager has in the fund. contrafund's manager, for example, has more than a million dollars in the fund, as do six of the managers at the team- managed growth fund of america. that's certainly some skin in the game. the s.a.i. will also tell you how your fund votes in corporate elections, and whether it tends to side with management about c.e.o. pay or anti-takeover defenses. your fund literature may have all the excitement of a glass of warm milk and valium, but do yourself a favor and read it, anyway. you'll sleep better. i'm john waggoner. >> tom: the recession was tough on the nation's restaurants, but it sparked a resurgance in home cooking. that has sales booming on everything from baking sheets to cheese boards. diane eastabrook stopped by the international housewares show in chicago, where companies are cashing in on the craze to cocoon. >> you've got your wine opener and a couple of cheese utensils, and it closes this way. >> reporter: picnic time, incorporated, has a cheese board for just about every taste. the company's president, mario tagilati, is pitching them this

week at the home and housewares show in chicago. >> the trade shows are always a way for us to know how the year is going, and we feel very confident this year. our spring shows-- they've been a little bit better this year for us. >> reporter: while home construction and sales continue to struggle in a weak u.s. economy, sales of home products are actually picking up steam. the international housewares association says they began gaining traction here two years ago. perry reynolds is the association's vice president of marketing and trade development. he's been quizzing vendors and buyers at the show, and is encouraged by what he's hearing. >> we had a really good late fall. we had a good january, a good february. we've seen some of the numbers from the larger retailers. they all look very good, and within that, home is even a stronger portion of the growth in their business. >> reporter: one trend that has helped a lot of these companies thrive over the last couple of

years has been the desire by consumers to eat in more than out. le creuset sells upscale pots and pans. marketing vice president steve jones says many consumers are watching their budgets, but they're not skimping on quality. >> when times are tough, they are looking for a great value, a sure value. so they'd rather invest a little bit more to make sure the brand is going to stand behind the product, that the product will last a long time and it's guaranteed. >> reporter: about a quarter of the 2,000 vendors at the show are first-timers. others, like the onecare company, are returning after a two-year hiatus. president thomas penner says the cleani products company is capitalizing on the popularity of private labels. >> if a very strong retailer has a very good private label program, that is going to resonate with consumers and have them come back to stores more often. >> reporter: the recession has changed one thing for many of these companies-- there are fewer retailers to sell to. they say that is forcing them to

become better marketers and better innovators. diane eastabrook, "nightly business report," chicago. >> tom: that's "nightly business report" for tuesday, march 8. we want to remind you this is the time of year your public television station seeks your support... >> susie: ...support that makes programs like "nightly business report" possible. >> tom: thanks for joining us, and don't forget to support your public television station. i'm tom hudson. good night, everyone. you., too, susie >> susie: good night, tom. i'm susie gharib. we'll see all of you again tomorrow evening. "nightly business report" is made possible by: this program was made possible by contributions to your pbs

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